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Apollo Global Management received final approval from Nevada gaming regulators on Thursday (February 17) for its portion of the $6.25bn deal to acquire the operations of the Strip properties owned by Las Vegas Sands.
Four members of the Nevada Gaming Commission (NGC) voted to approve Apollo’s license. Commissioner Rosa Solis-Rainey recused herself from participating in the hearing because her law firm, Morris Law Group, is representing Apollo in a lawsuit, although she is not involved in the case.
The commission spent more than 90 minutes hearing from David Sambur, co-head of private equity for Apollo, and Brian Carney, the company’s general counsel for litigation and regulation.
Apollo, Las Vegas Sands and VICI Properties first announced the deal in March 2021. Under its terms, Apollo is acquiring the operations of The Venetian, Palazzo and Venetian Expo Center for $2.25bn.
Las Vegas Sands is providing $1.2bn of seller financing, with the New York-based private equity firm founded by investor and former CEO Leon Black putting up $1.05bn.
VICI Properties is paying $4bn for 63 acres of Las Vegas Strip real estate, as well as an additional 19 acres where the $1.8bn MSG Sphere concert arena is being developed.
VICI, a real-estate investment trust, was formed in October 2017, as a result of a spinoff from Caesars Entertainment Operating Company (CEOC), as part of a reorganization under Chapter 11 bankruptcy stemming from its former co-ownership by Apollo.
Commissioner Ben Kieckhefer said it was always interesting “when things come full circle.”
Kieckhefer also asked why the deal needed to be done with a REIT. Sambur said including VICI was his idea because Las Vegas Sands was asking for $6bn “and there was no direct debt financing available” because of the coronavirus pandemic.
Ron Reese, a spokesman with Las Vegas Sands, said Thursday the company will comment when the deal officially closes. The sale could be finalized next week.
Once the deal closes, Las Vegas Sands will no longer own any properties in Las Vegas, leaving the company founded by the late Sheldon Adelson with resorts in Macau and Singapore.
The gaming company will remain headquartered in Las Vegas, but will shift its focus to Asia and on other potential opportunities in the United Arab Emirates, New York and Texas.
“The sale of Las Vegas creates liquidity and optionality as we pursue additional large-scale, land-based destination resorts in the U.S. and Asia,” Rob Goldstein, chairman and CEO, told analysts during a fourth-quarter earnings conference call on January 26.
On Thursday, the commission received details on Apollo’s plans for the resort, the company’s previous 11-year ownership of Caesars that ended in bankruptcy and the relationship Black still has with the firm.
Sambur confirmed that Black is still the largest individual shareholder in Apollo, owning 11.9 percent of the company’s common stock, but that investment was “many levels above (Apollo Equity) Fund Nine, which is making the investment in The Venetian.”
Black resigned as chairman and CEO last March after published reports detailing his connections with alleged payments to disgraced financier and convicted sex offender Jeffrey Epstein and his company, Southern Financial LLC.
Sambur assured regulators that Black will have no role in overseeing the company’s investment in the properties. Sambur said he has the sole control over the firm’s investment as the sole member and manager of the operating company.
He said Apollo had also submitted a non-interference letter as part of the licensing process and Black has agreed not to seek a seat on the company’s board or put up a candidate for a board seat.
Black’s stake in the company has been diluted because of Apollo’s recent merger with Athene, Sambur added.
Still, Kieckhefer asked that a seventh licensing condition be added to the six already approved by the Nevada Gaming Control Board (NGCB), ensuring that regulators would be notified immediately should the situation with Black change.
Commissioners unanimously approved the seventh condition. The NGCB recommended approval of Apollo’s license on February 2 after a more than two-and-a-half-hour hearing.
“We have a 15-year relationship with the state of Nevada,” Carney said. “We have a spotless record. No fines. We view this as a long-term relationship not a short-term one.”
With concerns over any involvement by Black settled, Sambur moved on to the company’s Caesars’ purchase and subsequent bankruptcy.
“Gaming has been a key sector for us,” Sambur said. “We’ve done quite well with one noticeable exception, Caesars.”
Apollo’s ownership of Caesars, then known as Harrah’s Entertainment, began in 2008 with the $27.8bn leveraged buyout of the gaming company with private equity firm TPG Capital. The firm’s ownership ended in 2019, two years after the completion of Chapter 11 bankruptcy restructuring.
The restructuring changed Caesars’ ownership structure and eliminated $16bn of the company’s pre-bankruptcy $25.6bn debt.
Sambur said Thursday one of the questions Apollo is asked is why the same situation would not happen again.
He said the Caesars purchase and the Sands deal are the complete opposite. There is far less debt associated with the Sands transaction and the payment terms are far more favorable.
The Sands deal will have $18m of interest expense, which is about 5 percent of earnings, while Caesars had $2bn of cash obligations, or about 60 percent of annual earnings, he said.
Sambur said the Caesars deal was signed in December 2006 and from the time Apollo signed the deal to when it closed in January 2008, “basically all the underlying conditions that were assumed in the transaction completely reversed themselves.”
“Over the time period the stock market completely crashed, we had the onset of the great financial crisis, unemployment went from the low fours to about 10 percent and what began was a multi-year period of declines in Clark County gaming revenues … and travel to Las Vegas was somewhat vilified by folks in the government.”
Commissioners Ogonna Brown and Steven Cohen agreed the Las Vegas Sands transaction was different than the Caesars’ deal.
“I am truly convinced that what we are looking at today is a different scenario than what you addressed in Caesars,” Cohen said. “I’m pretty satisfied … a repeat would be an incredible, unlucky situation … if it were to happen.
